8 Insider Secret Real Estate Auction Tips That Makes Money
Besides traditional real estate listings and house viewing, you can purchase a property that goes under the hammer and needs real estate auction tips.
Buying an investment home at auction is riskier than buying through the normal process from a developer, real estate agent, or wholesaler.
Before you plunge into the world of auction properties, it is important to be well informed.
You need to know how the real estate market and types of auctions work.
What is an Auction property?
You can find home auctions through local governments, real estate agents, and other online sites.
They sell auction properties on an “as is where is” basis.
Buyers need to inspect the property to find out it is still there before bidding.
Sometimes flood or fire damaged houses are on the list of auction properties.
It is good that you understand the neighbourhood, the surroundings, the current state of the building, and compare prices in the area.
Review and understand all the auction rules, deposits (if any) and perform your due diligence on the property before you prepare to bid.
How Buying a House at Auction Works
The benefits of buying or getting a great deal at auction include expanding your options and perhaps purchasing at a discount off the actual market value.
Compared with buying traditionally, you will need to pay cash and deal with a different pool of potential buyers—often experienced investors.
What are the types of real estate auction are there?
There are different real estate auctions in the USA.
The auctions are determined by conducting the auction, why the property is being sold, and how it is run.
If you’re looking to buy a foreclosure property, a foreclosure auction should be your first stop.
Where is an auction venue?
A public auction (sheriff’s sale) is where banks, mortgage lenders, tax collectors, and other litigants can collect money lost on the property.
These in-person auctions often occur on a city’s or the county courthouse steps, managed by the local law enforcement officer (LEO).
What is an online auction?
A real-time online auction system is where the proceedings of an actual auction are broadcast live.
You can view this via video, audio, and images, which provides a new way for foreign investors to bid and buy online.
What are the different types of Real Estate Auctions?
As a new investor, you can look at a Foreclosure Sale or Tax Deed Auction.
Foreclosure Sale Properties
When a borrower or homeowner cannot make his mortgage payments after some time, they fall into default.
The bank will file a notice of default with the county recorder.
A loan defaulter is a homeowner who cannot settle the balance owed.
When they do not renegotiate the mortgage with the bank, they can put the home up for auction.
The foreclosure process forces the homeowner out of their homes for nonpayment.
Bank-hired trustees hold foreclosure auctions.
Property Tax Default (Tax Deed Auction)
When the owner does not pay the assessed property taxes (liens) in a Tax Deed Sales, the home ends up on the auction block.
The unpaid liens or unpaid taxes on the property accumulate.
The sale takes place through a public auction.
The reserve price starts with the minimum bid of the amount of back taxes owed plus interest. – that includes other costs associated with selling the property.
The highest bidder wins the property.
Real Estate Auction Tips That Makes Money
Let’s look at how real estate foreclosure auctions and tax deed auctions, both in-person and bidding online, get started.
Tip #1 – Look the Part
First impressions matter if you present yourself to other bidders in person, giving you leverage and advantage.
If you project an expert real estate investor’s image, others may be intimidated and less willing to bid against you.
People notice details – dress the part, wear a business suit, and write notes in an expensive-looking notebook.
You will across as a professional who knows something others don’t.
When you dress professionally, you look confident, making the right choices when starting the bidding.
The goal here is to play on the nerves of auction novices. The intimidation factor will help you achieve that goal.
There is no need to look the part of a professional real estate investor for the online auction.
Instead, you will need a super-fast and stable internet connection.
Tip #2 – Make a Good First Impression
The way you carry yourself in person makes a lot of difference in person.
Being confident shows, the people in the room know you are present and ready to win.
So, don’t be shy if other real estate investors look at you when you enter the auction room.
When you enter the auction hall, take a seat to show interest.
If you choose to stand, be visible, and speak confidently.
Always state the full amount – say “$500,000” instead of “500.”
Tip #3 – Keep Some Things to Yourself
You won’t want advice at a Tax Sale or have any suggestions – keep your thoughts to yourself!
In other words, do not reveal or share any opinion, information, or data with anyone else.
Remember, you are at the house auction to bid and win some properties.
Auction Day is not a day to make friends.
Everyone in the room is a potential competitor bidding for the same property.
The lesser information a seller knows about you, the least advantage they have over you.
If you go with a partner, don’t discuss your prices.
Others may hear and know how many properties you intend to bid for or how much you will pay.
You want to create the impression that you have the money to buy your selected property (and repair it).
Keep in a notice that auctioneers and sellers’ real estate agents want to drive the bids up to sell the property at the highest prices possible.
Remember that agents receive a higher commission when the properties are sold at the highest price possible.
Speaking to real estate agents before the auction gives you an excellent opportunity to learn more about auction property.
You can get an idea of other bidders’ interest by finding out how many people have requested building reports for a specific property.
Tip #4 – How reserve prices work in an auction
You can find out if a seller may choose to lessen the reserve price if there is low interest – however, this could cause more bidders to bid against you.
In case you are the leading bidder and have not met the reserve price, the auctioneer may ask you to raise your bid to meet the reserve instead of ending the auction.
If you agree, this may help you win the real estate property or help other bidders know how the fund compares to their budget.
Sometimes, it is better to allow the seller to “pass the property in.”
By doing this, you can prevent them from negotiating with other potential buyers.
It would also give you sole negotiating rights as the leading bidder.
Tip #5 – Determine a bid strategy based on your investment goals
To win at a property auction, you need a strategy.
You may think that by waiting until the auction nears its end to enter your bid.
However, this strategy is not fail-proof, as sometimes the auctioneer may end the auction and confirm the sale before you even bid.
You can come in with a large bid from the start.
Using this strategy can and knock out most of your competitors early on in the process.
Tip #6 – What is a reasonable auction clearance rate?
The auction clearance rate is the percentage of houses sold at an auction in a particular week or month.
To calculate the auction clearance rate, you divide the total number of properties sold at auction by the total number of properties listed for auction.
The Clearance Rate helps you determine if it’s a buyer’s market before heading to the real estate auction.
As a rule of thumb, a reasonable Auction Clearance Rate would be 70 – 75% or higher, which investors are after.
When you see Auction Clearance Rates as low as 40%, or even 0%, a soft market supply exceeds demand.
The percentage is an indicator of a market where demand exceeds supply.
The clearance rate is a useful indicator of the competition you will face and whether you will likely gain the investment property at a cheap cost.
Tip #7 – Why Buyers Should Use A Buyer’s Agent
You may expect you are ready to bid and pick up your next property auction now that you can access these tips.
It is usual for a first-time buyer to feel anxious going into an auction; this is normal.
When you hire a buyer’s agent, you get professionally trained in finding you the perfect investment property.
Your Agent has your best interests in mind when submitting a bid, on-site or online.
You get the expertise and experience of an agent who is there for you every step of the way.
Cost of Repairs
You get on “boots on the ground” from the US Team, who drive by to view and assess and put a cost estimate on the property condition.
Details like rehab and renovation costs help determine the offers or maximum bid (purchase price) to put in at the property auctions.
A reasonable sound estimate includes knowing how to rectify existing code violations of the sale properties, costing thousands of dollars.
You need to know the types of properties and the price range before you can bid.
Preparing for an auction not only requires research, but it also includes documents, earnest money deposits and paying promptly after the property is won, and getting the title deed.
The services of a professional facilitation company like Noble Sky International will come in handy if you choose to bid on a Foreclosure or Tax Deed Auction.
Noble Sky represents YOU and your best interests.
Tip #8 – Co-investment: When investors get to team up
A professional real estate company helps removes the emotion out of the property auction process.
Big and small investors find it mutually beneficial to work together to acquire a single property or several properties.
Noble Sky International is the ONLY Professional US Real Estate Investment Company in Singapore and Southeast Asia to generate a profitable offer for this business model.
We teach core research skills to our property investors and build a community of like-minded investors where they can acquire properties together.
All you have to do is establish your Financial Goals and how often you want to invest in American real estate.
We specialize in USA Real Estate Investing, using a proven strategy that will perform for you.
Make your Best Financial Decision and join our Specialized Workshop to learn how to help you accomplish your dreams.
When used correctly with market knowledge and research, these auction tips should help you in your ambition of succeeding at a real estate auction.
For investors to keep on flying into the USA to make the bids, keep in mind that Noble Sky International’s Founder, Rauf Said, has made 16 physical trips to Stateside in 2 years to bid for properties personally.
The key to finding a valuable bargain lies in the deep level research done coupled with a physical inspection of the listed properties.
Your bidding strategy is to know your numbers, the property’s cost, market value, repair estimates, and potential purchase cost to win at an auction sale.
These factors can contribute to a positive and pleasant auction day experience at the auction house for a successful bidder and, ultimately – a wise purchase.
Good luck, all the best, and happy bidding!